“The Indian market for smartphones is quite small compared to the developed markets due to the low per capita income levels,” Sneha Shah writes for Seeking Alpha. “Smartphones currently make up less than 10% of the total mobile market, which is very low even when compared to other countries like China.”

“However, this low level of smartphone penetration means that the opportunity to grow is huge,” Shah writes. “Smartphones grew at an astounding ~75% rate in the 2nd half of 2012 according to research agency Cyber Media. Apple is making aggressive moves to capture the Indian market and has for the first time started a cashback war in India. I think this is a great move for Apple and remain positive on the stock.”

Shah writes, “Apple has already tasted success due to its changed strategy and is now the second largest smartphone seller in India in terms of revenue. Apple has continued to put pressure on its competitors by now selling its iconic iPhone with a heavy discount. Under a new scheme which is being heavily advertised, Apple is selling its older version of iPhone at Rs 7,000 discount in exchange for a customer’s old smartphone. According to dealers, Apple is incentivizing dealers by giving Rs 5000 debit note to cover up for the iPhone 4 discount. The rest of the discount is given by the dealer who makes up the difference by selling the older smartphone in India’s vibrant second hand mobile phone market. Apple is still making significant profits even after this ~25% discount as it is helping in clearing the older iPhone 4 inventory. Sales under the scheme are seeing a huge response as customers who cannot afford the iPhone 5 are flocking to buy the iPhone 4 for under $400 (iPhone 5 costs almost $900). I think this has been a very smart move by Apple. This cashback scheme is being offered by top retailers in India and has already made Samsung respond back with its own cashback scheme.”

Apple must think people in India are buffaloes by selling the antiquanted iPhone 4 to them.

It’ll only reflect badly on the tightwads in Cupertino when buyers discover that the phone doesn’t have Siri, turn by turn navigation or any of the stuff we want to see in a modern smartphone, turning thus a generation of future iPhone users into angry pissed off ants.

I view this differently. The iPhone 4 was/is a highly competent smartphone. At a low price point, it becomes an extremely attractive alternative to a feature phone. Now here’s the cool part: when it comes time to upgrade, these first-time iPhone users will probably upgrade to a discounted iPhone 5.

Your comment spotlights your total US-centric view and ignorance of other markets on this planet. Remember that smartphone penetration is around only 10% of the market in India. This is a brilliant strategy by Apple. I currently own an iPhone 4 and think it’s far better than the crap you’d buy from, say, Samsung. Even if it is “antiquated” by your US standards, it’s still a better smartphone than 99% of the offerings from other manufacturers. I am very, very happy with my iPhone 4, and I think Indian consumers will snap these babies up faster than Apple will be able to supply. And “turn-by-turn navigation”? What a stupid comment. India is not so auto-centric as your beloved US, and I doubt that this feature is even on the radar of most Indian consumers. Also note that most of the nav apps available are North America only. Your post simply displays your high level of ignorance of how things work beyond the borders of the US of A.

This is a very smart way to get a foothold in India. The earlier generation approach has worked well in emerging markets as well as addressing the lower cost options in established markets. Best of all it maintains margins as much as possible.

Apple is offering a “more affordable” solution to a “not crappy” phone, than all the other competitors.

I feel that when you provide your world class phone, to your customers, they appreciate it.

Other companies are more likely to offer, a crappy version of their products for lower income societies. (See Windows Basic) They made it special, so developing nation’s citizens can afford it, yet those people understand that yes they are third class and not worth the real thing. :-(